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Tag Archives: daily deals

Turns out there’s something to be said for being capitalist, and a rather large downside to being a profiteer. Unfortunately, Groupon is just finding this out.

The Groupon IPO is in trouble after the SEC (Securities and Exchange Commission) informed them their revenue reporting is out of whack.

Apparently, Groupon has been reporting the full value of a Groupon sale as revenue – in spite of having to give at least half that value back to the store owner. The result is that they’ve had to change their revenue claims from $1.52 billion for the first six months of 2011 all the way down to $688 million.

That has to be the world’s quickest way to lose a billion dollars!

If you’ve been listening to the show over the last few weeks (SocialMediaCheapAndEasy.com), you know I’ve been driving home the difference between Profiteering and Capitalism. One of the targets of this point has been ALL the daily deal sites.

It’s common to hear marketing and internet gurus talk about having the “tollbooth position.” This is where you control access to the traffic – just like a tollbooth controls access to a roadway. People have to go to you if they want access to a particular audience.

Is Facebook killing music sharing because they’re profiteers or just ignorant?

Facebook is talking about bringing music sharing services such as Spotify, Rhapsody, Rdio, MOG and Deezer onto their site. The idea is to make your profile an entertainment hub. But how much of a hub will it be if it drives these businesses out of business?

Very few online music services are profitable, and they have a model that causes them to lose money every time a free subscriber joins. After all, even “free” music requires a royalty paid to the record companies.

Pandora, which had a successful IPO, has yet to make a profit. Martin Scott from Analysys Mason estimates Spotify had a $6 or $7 million dollar profit in 2010, and Rhapsody’s president Continue reading →